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UK's FCA restricts fintech owned by Uruguay’s first billionaires

Tan KW
Publish date: Wed, 12 Jun 2024, 10:21 PM
Tan KW
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UK regulators imposed a series of restrictions on a financial-technology company owned by Uruguay’s first-ever billionaires as part of a widening crackdown on payments firms that process hundreds of millions of dollars worth of transactions every day.

The Financial Conduct Authority (FCA) has barred Larstal Ltd from providing payments services or taking on new customers without the watchdog’s written approval, according to a posting on the FCA’s website. The company, which operates as AstroPay and is part of a global payments empire overseen by Andrés Bzurovski Bay and Sergio Enrique Fogel Kaplan, specialises in processing transactions for high-risk clients, filings show. 

The FCA has been trying to improve standards among so-called electronic money institutions (EMIs) - payments firms that are lightly regulated. The agency has authorised scores of EMIs, including AstroPay, to operate in the UK in recent years, but is now concerned that the sector is rife with fraud and poor anti-crime controls.

Fogel said in an emailed statement that AstroPay and the FCA “mutually agreed to voluntarily suspend” the company’s EMI licence. The move followed discussions with the regulator and “the realication that the licence held was not necessary to conduct its business at this time,” he said. An AstroPay spokesperson said separately that the company had “voluntarily placed restrictions to improve operational capabilities”.

A spokesperson for the FCA declined to comment. 

The FCA placed the restrictions on AstroPay through a so-called voluntary undertaking, under which a company pledges to improve its operations.

“Voluntary undertakings of this nature are seldom genuinely at the firm’s own initiative,” James Borley, a former FCA regulator and managing director at Cosegic Ltd, said in an email. “Rather than take the firm through a formal process, resulting in the issue [and publication] of a formal supervisory notice, the FCA will typically ‘persuade’ the firm itself to apply for a restriction to be placed on its permission.”

AstroPay owed several million dollars to customers at the end of 2022, filings show, and the company must also ensure that “all relevant funds are appropriately ring-fenced”, according to the FCA. Services in the UK are “temporarily unavailable due to voluntary restrictions on our financial activities,” AstroPay said in a notice posted on its website.

The company, closely held by Fogel and Bzurovski, processes transactions for customers in industries including online gambling, foreign-exchange trading and adult entertainment, filings show. The bulk of its business takes place across emerging markets such as Brazil and India. 

AstroPay is listed as a payments processor for multiple currency-trading websites based in offshore locations such as Belize, Saint Lucia and Saint Vincent and the Grenadines. Many of them say they allow customers to borrow hundreds and even thousands of times their initial deposit, a practice that UK and European regulators have outlawed for retail investors. 

The company also was the main sponsor of Wolverhampton Wanderers - a Premier League football club known as Wolves - from 2022 until the end of the most recent season, according to the club’s website. AstroPay’s logo featured on the front of the players’ kits and it even introduced a Wolves-branded debit card. The team announced a new sponsor this week.

Fogel and Bzurovski became the first-ever billionaires in their native Uruguay in 2021 when they spun off another part of their group, Montevideo-based dLocal Ltd, as a publicly traded company. Its market capitalisation soared to more than US$20 billion that year, but its shares have tumbled some 88% from their height following allegations of fraud made by famed short-selling firm Muddy Waters LLC and a separate regulatory probe in Argentina.

Fogel and Bzurovski remain major shareholders and board members at dLocal, and Fogel took on an expanded management role last year, while also controlling AstroPay. According to dLocal’s latest annual report, dLocal still provides some payments services to AstroPay, but a spokesperson for the company said those payments ended in the first half of 2023. Former dLocal chief executive officer Sebastián Kanovich previously held the same role at AstroPay. 

A dLocal spokesperson said in an emailed statement that there is “no relationship” between the two firms “other than shareholders that are investors in both companies”.

The pair’s complex patchwork of corporations formed part of a 47-page report published in November 2022 by Muddy Waters that alleged “one of the most extensive catalogs of governance shortcomings we can recall.” The investment firm, renowned for high-profile bets against companies it accuses of wrongdoing, cited “previous and ongoing entanglements” between dLocal and AstroPay.  

The allegations, which dLocal denied, sent the firm’s shares tumbling 51% in one day. The stock recovered much of its value last year but has since tumbled again.


  - Bloomberg


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